Judge: Maurice A. Leiter, Case: 22STCV24776, Date: 2023-03-28 Tentative Ruling

Case Number: 22STCV24776    Hearing Date: March 28, 2023    Dept: 54

Hearing Date: March 28, 2023

Department 54, Judge Maurice A. Leiter

Motion to Compel Arbitration;

Demurrer to Cross-Complaint

Moving Party: Plaintiff/Cross-Defendant Silver Star Construction Engineering, Inc.

Responding Party: Defendant/Cross-Complainant 2251 Duane St. LLC

T/R:    PLAINTIFF/CROSS-DEFENDANT’S MOTION TO COMPEL ARBITRATION IS GRANTED. THE ACTION IS STAYED.

PLAINTIFF/CROSS-DEFENDANT’S DEMURRER TO THE CROSS-COMPLAINT IS MOOT.

PLAINTIFF TO NOTICE.  

If the parties wish to submit on the tentative, please email the courtroom at¿SMCdept54@lacourt.org¿with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

The Court considers the moving papers, opposition, and reply.

BACKGROUND

            On August 12, 2022, Plaintiff Silver Star Construction Engineering, Inc. filed the operative first amended complaint against Defendant 2251 Duane St. LLC, asserting causes of action for (1) breach of contract; (2) account stated; (3) reasonable value; (4) violations of prompt payment statutes; and (5) foreclose mechanic’s lien. Plaintiff alleges Defendant failed to pay Plaintiff for construction work to develop residential units in Silver Lake. Duane filed a cross-complaint against Silver Star on October 19, 2022.

ANALYSIS

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate a controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists….”  (CCP § 1281.2.)  The right to compel arbitration exists unless the court finds that the right has been waived by a party’s conduct, other grounds exist for revocation of the agreement, or where a pending court action arising out of the same transaction creates the possibility of conflicting rulings on a common issue of law or fact.   (CCP § 1281.2(a)-(c).)  “The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.”  (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)

A. Existence of Arbitration Agreement

            Plaintiff moves to compel arbitration based on the arbitration provision in the Prime Contract, and AIA A-102 Standard Form of Agreement, executed by the parties on February 27, 2019. (FAC, Exh, A.) Section 6.2 “BINDING DISPUTE RESOLUTION” presents three options for dispute resolution: (1) “Arbitration pursuant to Section 15.4 of AIA Document A201-2007;” (2) “Litigation in a court of competent jurisdiction;” or (3) “Other.” The parties selected the first option, agreeing to arbitration pursuant to Section 15.4 of AIA Document A201-2007. (Id.) AIA A201-2007 Section 15.4 states, “If the parties have selected arbitration as the method for binding dispute resolution in the Agreement, any Claim subject to, but not resolved by, mediation shall be subject to arbitration which, unless the parties mutually agree otherwise, shall be administered by the American Arbitration Association in accordance with its Construction Industry Arbitration Rules in effect on the date of the Agreement.” (Decl. Tatoulian, Exh. C.)

            In opposition, Defendant asserts that no agreement to arbitrate exists because AIA A201-2007 was not properly incorporated into the Prime Contract.

“As a general rule, a party is bound by the provisions of an agreement which he signs, even though he does not read them and signs unaware of their existence.” (King v. Larsen Realty, Inc., supra, 121 Cal.App.3d at p. 358, 175 Cal.Rptr. 226.) Further, “[a] contract may validly include the provisions of a document not physically a part of the basic contract.... ‘It is, of course, the law that the parties may incorporate by reference into their contract the terms of some other document. [Citations.] But each case must turn on its facts. [Citation.] For the terms of another document to be incorporated into the document executed by the parties the reference must be clear and unequivocal, the reference must be called to the attention of the other party and he must consent thereto, and the terms of the incorporated document must be known or easily available to the contracting parties.’ ” (Williams Constr. Co. v. Standard-Pacific Corp. (1967) 254 Cal.App.2d 442, 454, 61 Cal.Rptr. 912, italics added; accord, King v. Larsen Realty, Inc., supra, 121 Cal.App.3d at p. 357, 175 Cal.Rptr. 226.)

(Chan v. Drexel Burnham Lambert, Inc. (1986) 178 Cal.App.3d 632, 641.)

            Defendant asserts that AIA A201-2007 was not incorporated because a copy was not attached the Prime Contract nor provided to Defendant at any point before execution. Defendant also represents that Plaintiff did not point out the arbitration provision in the Prime Contract or AIA A201-2007, and that Defendant did not have easy access to AIA A201-2007.

            In reply, Plaintiff states that the first page of the Prime Contract states, “AIA Document A201-2007 General Conditions of the Contract for Construction, is adopted in this document by reference. Do not use with other general conditions unless this document is modified” and notes that the A201-2007 General Conditions are referenced and incorporated 14 times throughout the Prime Contract. Plaintiff argues these references are clear and unequivocal and that A201-2007 General Conditions are available via Google search.

            The Court finds that AIA A201-2007 was properly incorporated into the Prime Contract. It is referenced more than a dozen times in the Prime Contract. The parties specifically and voluntarily selected arbitration under AIA A201-2007, despite the other options. AIA A201-2007 was accessible to Defendant with little effort. That Defendant chose not to review this document does not relieve it of its contractual obligations.

            Plaintiff has met its burden to establish the existence of an agreement to arbitrate. The burden shifts to Defendant to establish any defenses to enforcement.

B. Enforceability

Defendant argues that the agreement is not enforceable because Plaintiff has waived the right to compel arbitration. “[T]here is no ‘single test’ for establishing waiver, ‘the relevant factors include whether the party seeking arbitration (1) has 'previously taken steps inconsistent with an intent to invoke arbitration,' (2) 'has unreasonably delayed' in seeking arbitration, (3) or has acted in 'bad faith' or with 'wilful [sic] misconduct.’” (Christensen v. Dewor Developments (1993) 33 Cal.3d 778, 782, citing Keating v. Superior Court (1982) 31 Cal.3d 584, 605.)

Defendant asserts Plaintiff has taken steps inconsistent with the intent to arbitrate by filing the complaint, waiting five months to file the motion to compel arbitration and filing a demurrer to Defendant’s cross-complaint. In reply, Plaintiff represents that it filed suit to preserve its statutory mechanic’s lien rights, and notified Defendant of its intent to arbitrate 3.5 months after filing suit. Plaintiff states that no meaningful discovery or settlement negotiations have taken place.

Defendant has failed to establish waiver. The filing of the complaint was not inconsistent with the right to arbitrate, and Defendant has been informed of Plaintiff’s intent since the beginning of litigation. The litigation machinery has not been significantly invoked; there is no evidence of bad faith. The agreement is enforceable.

Plaintiff’s motion to compel arbitration is GRANTED. The action is STAYED.